AS expected, the publication of Mining Charter 3 last month provoked a wave of negative sentiment about South Africa’s mining prospects.
The expectation is that, in its current form, the Mining Charter will chase away offshore investors, which is to say, almost anyone with an interest in a competitive return given the capital market is global rather than wholly white or completely foreign.
History, however, may indicate mining majors are slightly more resilient than they are given credit for; at least, this was one of the points made at the Junior Indaba conference in June, two weeks before the publication of the third Mining Charter.
Whilst there’s no doubting that the charter delivers a firm kick in the pants to investors, it might be worth entertaining the view that the best investors are the most adaptable.
Tim Clark, head of mining research at Standard Bank Group Securities, believed that while there have been divestments by the majors from South Africa, they have not necessarily been motivated by political risk; at least, not entirely.
For instance, BHP demerged its African assets into South32 because it was trying to achieve simplicity, not because it didn’t want to be in South Africa.
In its place, South32 has committed to significant investment in South Africa’s coal mines “… so we can’t overstate that,” said Clark at the conference. There has also been no real change in Rio Tinto’s material South African investments such as Richards Bay Minerals.
“That leaves us with Anglo. My personal view is that Anglo is a significant party in South Africa. It has got the biggest, most powerful platinum business in the world, and a significant diamond operation in Venetia,” said Clark.
“That leaves you with thermal coal and manganese which is perhaps not on Anglo’s radar because those are not the kind of commodities it wants to be in,” he said.
Said Piet Viljoen, chairman of RE:CM, an asset management business: “If you believe what the majors tell you on a day-to-day basis on strategy, then you are falling for their manipulation.
“Five years ago, every company said Africa was the future. Where is that now? Listed companies tell you what you want to hear; the story of today, because they are interested in keeping you happy, keep you funding their business and keeping the share price up.
“You need to take what the majors are saying publicly with a healthy dose of scepticism,” Viljoen added on the perception that policies in South Africa are driving them to other shores.
